a. Compute the expected retum for the corporate bond fund and for the common stock fund. The expected return for the corporate bond fund is. (Round to two decimal places as needed.) The expected return for the common stock fund is (Round to two decimal places as needed.) b. Compute the standard deviation for the corporate bond fund and for the common stock fund. The standard deviation for the corporate bond fund is. (Round to two decimal places as needed.) The standard deviation for the common stock fund is (Round to two decimal places as needed.)

a. Compute the expected retum for the corporate bond fund and for the common stock fund. The expected return for the corporate bond fund is. (Round to two decimal places as needed.) The expected return for the common stock fund is (Round to two decimal places as needed.) b. Compute the standard deviation for the corporate bond fund and for the common stock fund. The standard deviation for the corporate bond fund is. (Round to two decimal places as needed.) The standard deviation for the common stock fund is (Round to two decimal places as needed.)

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Description: You plan to invest $1,000 in a corporate bond fund or in a common stock fund. The information to the right about the annual return (per $1,000) of each of these investments underdifferent economic conditions is available, along with the probability

Holt Mcdougal Larson Pre-algebra: Student Edition 2012

1st Edition

ISBN:9780547587776

Author:HOLT MCDOUGAL

Publisher:HOLT MCDOUGAL

Chapter11: Data Analysis And Probability

Section11.9: Independent And Dependent Events

Problem 1E

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Question

You plan to invest $1,000 in a corporate bond fund or in a common stock fund. The information to the right about the annual return (per $1,000) of each of these investments under
different economic conditions is available, along with the probability that each of these economic conditions will occur. Complete parts (a) through (d) below.
Economic
Probability Condition
0.01
Corporate Common
Bond Fund Stock Fund
<-300
Extreme recession
0.09
0.20
-990
-350
- 50
Recession
Stagnation
Slow growth
Moderate growth
High growth
-40
30
70
80
0.25
0.30
0.15
50
150
350
90
a. Compute the expected retum for the corporate bond fund and for the common stock fund.
The expected return for the corporate bond fund is
(Round to two decimal places as needed.)
The expected return for the common stock fund is
(Round to two decimal places as needed.)
b. Compute the standard deviation for the corporate bond fund and for the common stock fund.
The standard deviation for the corporate bond fund is.
(Round to two decimal places as needed.)
The standard deviation for the common stock fund is
(Round to two decimal places as needed.)
c. Would you invest in the corporate bond fund or the common stock fund? Explain.
V that for the corporate bond fund, the common stock fund
V fund should be chosen, Since the standard deviation for the common stock fund is
Based on the expected value, the
the risk when making a decision.
the corporate bond fund and an investor

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